As expected, the Fairfield County office market has taken a beating in the COVID-19 era, according to the latest quarterly report by Newmark Knight Frank.
Second-quarter leasing volumes declined by 27.8% and 28.7% over the past year and the previous second quarter, respectively. Year to date, the county lost a total of 315,793 square feet in occupancy, while the overall availability rate fell from 26.8% last year to 27.4%.
The state”™s May 20 launch of the second phase of its reopening plan, which included outdoor dining, retail stores, malls and offices, has provided some succor.
“Companies are still unsure how much space they will need as they reopen,” according to the report, “but although space utilization rates remain to be seen, the most important factor they are considering is a reconfiguration of current space to a higher ratio of square feet per employee to encourage social distancing, while allowing for telework.”
Interest by some New York City-based firms in exploring suburban markets has potential, NKF said: “Throughout the second quarter, there were numerous inquiries coming out of Manhattan for short-term space with an emphasis on prebuilt plug-and-play spaces.”
Executives and employees alike who work in New York City and reside in the suburbs are not eager to return to commuting by train.
“As companies begin to open up, both employers and landlords in the city are faced with yet another challenge: how to safely transport people in elevators and manage the crowds waiting for them,” according to the report.
The Greenwich market has been of particular interest to New York City firms, with at least five COVID-19-related transactions finalized and some others still in the pipeline.
One of those transactions was Owl Rock Capital Partners, which committed to 10,700 square feet at The Anchorage in the waterfront. Nearby, Edgewood Management subleased 9,412 square feet at 600 Steamboat Road, and Cramer Rosenthal McGlynn leased 7,345 square feet at 28 Havemeyer Place, near Greenwich Avenue.
As a result, NKF said, absorption for Class A space in the Greenwich Central Business District market ended with positive 40,000 square feet for the quarter, while availability went from 15.2% last quarter to 14.2%.
Year to date, leasing activity in Greenwich reached 150,000 square feet, of which 90,000 square feet occurred in the CBD ”“ a year-over-year increase of 6.2%. As of the second quarter, the Class A average asking rent in Greenwich CBD stood at $93.58 per square foot, down 3.8% from $97.28 per square foot a year ago.
Other notable second-quarter transactions included Greenwich Education Group taking 70,000 square feet at 201 High Ridge Road in Stamford; Bankwell Financial signing for 30,000 square feet at 258 Elm St. in New Canaan; and Cadenza Innovation taking 17,000 square feet at The Ridge in Danbury.
Two significant renewals signed in the Stamford CBD market: Ernst & Young for 36,000 square feet at 300 First Stamford Place and McKinsey & Company for 24,000 square feet at Two Harbor Point. Leasing volumes in that market declined by more than 30% from both last quarter and last year, while availability went from 26.1% last year to 29.3%.
The lack of demand in the second quarter was more evident in Norwalk, where almost no leasing took place. Availability in that market went up by a percentage point to 36.5% due to the addition of 45,000 square feet of sublease space by Crius Energy at 535 Connecticut Ave. Another sublease came online at the Wilton Woods campus, where 29,000 square feet is being offered by Epsilon. All told, occupancy in the South Central market fell by 114,815 square feet in the second quarter.
The long-term effects of the pandemic as it relates to the office market remain hard to predict, the report said. While during the 2008-09 recession, the county”™s sublease availability rate peaked at 5.1%, it ended at 4.6% ”“ up from 4.2% in March of 2020 and from 4.4% a year ago.
But the fact that businesses are each wrestling with how ”“ and when ”“ to reopen, and under what conditions, remains the great unknown, NKF said.
